RLB Steiermark 15s offer hope with EUR1.2bn book
A EUR500m 15 year covered bond for Raiffeisen-Landesbank Steiermark today (Thursday) sold “like hot cakes”, attracting EUR1.2bn of demand from over 70 accounts while paying a new issue premium at the lower end of the recent range, in a positive sign for the market.
Raiffeisen-Landesbank Steiermark announced a mandate on Friday for a EUR500m no-grow long dated covered bond. After holding investor calls on Monday, it yesterday announced a mandate for a 15 year issue.
Leads DZ, Erste, LBBW, RBI and UniCredit launched the deal this morning with guidance of the mid-swaps plus 15bp area. After around half an hour, the leads announced that books were over EUR600m, excluding joint lead manager interest.
Guidance was subsequently revised to the 13bp area with books above EUR900m, excluding JLM interest, before the spread was set at 11bp with books above EUR1bn, excluding JLM interest. The final book stood at EUR1.2bn good at re-offer, with more than 70 accounts.
“This was selling like hot cakes,” said a syndicate banker at one of the leads. “In some ways it felt as though the setback we had just after Easter had already come to an end.”
Syndicate bankers away from the leads said it was a positive sign that the deal attracted healthy demand seemingly without having to pay a large new issue premium, after successive deals in April paid higher premiums of up to 10bp to ensure success.
“The market definitely feels better now than it did a few weeks ago,” added one.
Bankers said it was difficult to calculate fair value for the new issue given that it extends the Austrian covered bond curve by five years. Syndicate bankers saw Raiffeisen-Landesbank Steiermark June 2028s – its longest-dated outstanding – at 3bp, mid.
A syndicate banker at one of the leads suggested the deal therefore paid a new issue premium of around 3bp, noting that in the Netherlands, where issuers have more regularly tapped the 15 year maturity, the spread differential between 10 and 15 year paper is roughly 5bp.
Some bankers noted that the deal was priced 1bp wider than the re-offer spreads of the last two 15 year euro benchmark covered bonds, a EUR500m issue for Axa Bank Europe on 10 April and a EUR500m issue for Swedish Covered Bond Corporation on 11 April. They said this represented a good result, as Raiffeisen-Landesbank Steiermark’s covered bonds trade a few basis points wider than those of Axa and SCBC.
“I think that what will have mattered most will have been the outright spread and the yield, which are quite attractive for triple-A paper,” said a syndicate banker away from the leads.
The deal was not yet priced at the time The CBR went to press, but it was expected to be priced with a coupon of 1.375%, according to a lead syndicate banker.